Peyto Energy Trust has established itself as a leading natural gas company in North America by focusing on an area where its knowledge is unrivalled.
While many oil and gas companies talk about maintaining a core area focus, Peyto Energy Trust is a rare example of a company that truly does it.
Written by James Buchanen and produced by Jason Wright
Over its nine-year life, this successful gas exploration and development company has systematically built itself through geographically focused drilling projects. It has stuck to what it does best in a localized area it knows best. As a result, it has become a leader amongst North American natural gas companies; a leader in cost structure and a leader in reserve life of its wells.
Vertical integration
The result, says Scott Robinson, VP of Operations for Calgary-based Peyto, is that the company has been able to offer a sustainable and steady investment opportunity for investors looking for exposure to the natural gas market. The company is a vertically integrated – wells, pipelines, and processing plants – natural gas exploration, development and processing company, which is publicly traded on the Toronto Stock Exchange.
Peyto Energy Trust is established as a Royalty Trust, which is characterized by the regular disbursement of part of its income in the form of before tax distributions. In the case of Peyto, the distributions amount to approximately 50 to 60 percent of its cash flow. The remaining cash flow is continually reinvested in order to sustain the company and its operations.
These operations are focused in the Alberta Deep Basin, which is a natural gas rich sedimentary deposit in the west central portion of Alberta along the edge of the eastern slope of the Canadian Rockies.
Peyto has focused its efforts on a design, drill and build strategy exclusively for the Deep Basin. The Deep Basin is considered Alberta’s premier exploration area for high quality gas reserves.
As such, the company reports that over the last eight years when compared to competitors such as Conoco, CNRL, Talisman, and Devon, Peyto ranks second in terms of the number of wells it has brought on production, with 548.
“The natural gas that we are producing is contained within very thick and expansive sandstone reservoirs, characterized in their flow capacity as low permeability, which results in a long, long reserve life,” he says. “Our production life is expected to last well beyond 20 years, so an investor in our company has a long horizon in the promising natural gas market that they can count on.”
In total, the company has two main areas of operation both in close proximity (60 miles) and, each with its own natural gas processing plants and extensive pipeline systems. The areas are located 140 miles west of Edmonton, Alberta in the eastern shadow of the Canadian Rockies with total gas processing capacity of 195 million cubic feet per day.
As to the company’s choice to restrict itself to a very small area of the province, Robinson notes…
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